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Accounting for inventory

Example 2

INV has closing inventory of 5 units at a cost of $3.50 per unit at 31 December
20X5. During the first week of January 20X6, INV entered into the following
transactions:

Purchases

 2 January – 5 units at $4.00 per unit

 4 January – 5 units at $5.00 per unit

 6 January – 5 units at $5.50 per unit

INV sold 7 units for $10.00 per unit on 5 January.

Required:

(a) Calculate the value of the closing inventory at the end of the first
week of trading using the following inventory valuation methods:

1 FIFO

2 Periodic weighted average cost

3 Continuous weighted average cost

(b) Prepare the trading account of INV to determine gross profit for the
first week of trading using each method of inventory valuation.

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